A Cost- Push Inflation Spiral Results If the Fed's Response

question 283

Multiple Choice

A cost- push inflation spiral results if the Fed's response to stagflation is to keep

• A) increasing aggregate supply.
• B) decreasing aggregate supply.
• C) increasing aggregate demand.
• D) decreasing aggregate demand.

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Definitions:

Implicit Costs

Denotes the opportunity costs of utilizing resources owned by the firm for its operations, instead of allocating them elsewhere to earn a return.

Total Cost

The sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.

Accounting Profit

The difference between total revenue and explicit costs of a business.

Economic Profit

The profit a company makes after deducting both explicit and implicit costs, reflecting the total opportunity costs of its resources.